FY11-CMS-Fin-Full

              STATE OF ILLINOIS
DEPARTMENT OF
CENTRAL MANAGEMENT .SERVICES
FINANCIAL AUDIT
For the Year Ended June 30,2011
Performed as Special Assistant Auditors for the
Auditor General, State of Illinois
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
FINANCIAL AUDIT
For the Year Ended June 30, 2011
TABLE OF CONTENTS
PAGE
AGENCY OFFICIALS ......................................................................................................... 1
FINANCIAL STATEMENT REPORT
Summary................................................................................................................... 2
Independent Auditors' Report.................................................................................... 4
BASIC FINANCIAL STATEMENTS
Government-wide Financial Statements
Statement of Net Assets . .. . . .. ... . .. . .. .. .. . .. .. . . . .. ... . .. . . .. . ... . .. ... . . . .. . . .. .. .. ... . .. . .... .. . . .. . . . .. 6
Statement of Activities .. .. .. ... .. .. . ...... .. . .. .. . . ... ... . . . .. .. . . . . . .. ... . . . ... . . . . . .. ... . .. . ... . .. . . .. . . . .. 7
Governmental Funds Financial Statements
Balance Sheet.................................................................................................... 8
Reconciliation of Governmental Funds Balance Sheet
to Statement ofNet Assets............................................................................. 9
Statement of Revenues, Expenditures and Changes in Fund Balances . . ... . .. . . .. 10
Reconciliation of Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to Statement of Activities........... 11
Proprietary Fund Financial Statements
Statement ofNet Assets.................................................................................... 12
Statement of Revenues, Expenses and Changes in Fund Net Assets............... 13
Statement of Cash Flows .................................................................................. 14
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
FINANCIAL AUDIT
For the Year Ended June 30, 2011
TABLE OF CONTENTS (continued)
PAGE
Fiduciary Funds Financial Statements
Statement of Fiduciary Net Assets.................................................................... 15
Statement of Changes in Fiduciary Net Assets................................................. 16
Notes to Financial Statements................................................................................. 17
Combining and Individual Fund Financial Statements
Nonrnajor Governmental Funds
Combining Balance Sheet........................................................................ 41
Combining Statement of Revenues, Expenditures and Changes
in Fund Balance....................................................................................... 42
Internal Service Funds
Combining Statement of Net Assets........................................................ 43
Combining Statement of Revenues, Expenses and Changes in
Net Assets................................................................................................ 44
Combining Statement of Cash Flows...................................................... 45
Agency Funds
Combining Statement of Fiduciary Net Assets........................................ 47
Combining Statement of Changes in Assets and Liabilities.................... 48
Independent Auditors' Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards........... 49
Schedule of Findings.................................................................................................. 51
Prior Findings Not Repeated...................................................................................... 56
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Director
Assistant Directors
Chief Operating Officer
Chief Fiscal Officer
General Counsel
Chief Internal Auditor
AGENCY OFFICIALS
Mr. Malcolm Weems- acting
(Effective June 16, 2011 through present)
Mr. James Sledge
(Through June 16, 2011)
Ms. Christine Cegelis
(Through May 31, 2011)
Mr. Steve McCurdy
Ms. Tasha Cruzat
(Effective September 20, 2010 through present)
Mr. Paul Romiti
Ms. Nadine Lacombe
Mr. Spenser Staton
(Effective September 16, 201 0)
AGENCY OFFICE LOCATION
715 Stratton Office Building
401 South Spring Street
Springfield, IL 62706
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
FINANCIAL STATEMENT REPORT
SUMMARY
The audit of the accompanying financial statements of the State of Illinois, Department of
Central Management Services as of June 30, 2011 and for the year then ended, was performed by
Sikich LLP as Special Assistant Auditors to the Auditor General, State of Illinois.
Based on their audit, the auditors expressed an unqualified opinion on the Department's basic
financial statements.
SUMMARY OF FINDINGS
The auditors identified matters involving the Department's internal control over financial
reporting that they considered to be material weaknesses and significant deficiencies. The
material weakness is described in the accompanying Schedule of Findings listed in the table of
contents as finding 11-1, weaknesses in internal control over financial reporting. The significant
deficiency is described in the accompanying Schedule of Findings listed in the table of contents
as finding 11-2, inadequate security and control over the midrange environment.
2
EXIT CONFERENCE
The findings and recommendations appearing in this report were discussed with Department
personnel at an exit conference on March 28, 2012. Attending were:
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Paul Romiti, Chief Fiscal Officer
Tammy Compton, Fiscal
Roger Nondorf, Chief Administrative Officer
Amy Walter, Internal Auditor
Denise Reed, Administrative Assistant
OFFICE OF THE AUDITOR GENERAL
Terri Davis, Audit Manager
SIKICHLLP
Gary Neubauer, Partner
Megan Cochran, Supervisor
Amy De Weese, Senior Accountant
The responses to the recommendations were provided by Paul Romiti in a letter dated April3,
2012.
3
Certified Public Accountants & Business Advisors
~Sikich.
3201 West White Oaks Drive, Suite 102 • Springfield, IL 62704
INDEPENDENT AUDITORS' REPORT
Honorable William G. Holland
Auditor General
State of Illinois
Members of American Institute of
Certified Public Accountants
As Special Assistant Auditors for the Auditor General, we have audited the accompanying
financial statements of the governmental activities, each major fund, and the aggregate remaining
fund information of the State of Illinois, Department of Central Management Services, as of and
for the year ended June 30,2011, which collectively comprise the Department of Central
Management Services' basic financial statements as listed in the table of contents. These
financial statements are the responsibility of the State of Illinois, Department of Central
Management Services' management. Our responsibility is to express opinions on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
As discussed in Note 2, the financial statements of the State of Illinois, Department of Central
Management Services are intended to present the financial position and changes in financial
position and cash flows, where applicable, of only that portion of the governmental activities,
each major fund, and the aggregate remaining fund information of the State that is attributable to
the transactions of the State of Illinois, Department of Central Management Services. They do
not purport to, and do not, present fairly the financial position of the State of Illinois as of June
30, 2011, and its changes in financial position including cash flows, where applicable, thereof for
the year then ended in conformity with accounting principles generally accepted in the United
States of America.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, each major fund, and the
aggregate remaining fund information of the State of Illinois, Department of Central
Management Services, as of June 30, 2011, and the respective changes in financial position and
cash flows, where applicable, thereof for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
4
In accordance with Government Auditing Standards, we have also issued a report dated April3,
2012 on our consideration of the State of Illinois, Department of Central Management Services'
internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion on the internal control
over financial reporting or on compliance. That report is an integral part of an audit performed
in accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
The State of Illinois, Department of Central Management Services has not presented a
management's discussion and analysis and budgetary comparison information for the General
Revenue Fund and the Road Fund that accounting principles generally accepted in the United
States of America has determined is necessary to supplement, although not required to be part of,
the basic financial statements.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the State of Illinois, Department of Central Management Services' basic
financial statements. The combining and individual fund financial statements are presented for
purposes of additional analysis and are not a required part of the basic financial statements. The
combining and individual fund financial statements have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements taken as a whole.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, the Comptroller, and agency
management, and is not intended to be and should not be used by anyone other than these
specified parties.
Springfield, Illinois
April3, 2012
5
State of Illinois
DeparlmentofCenua/ManagementServices
Statement of Net Assets
June 30, 2011 (Expressed in Thousands)
ASSETS
Unexpended appropriations
Cash equity with State Treasurer
Cash and cash equivalents
Securities lending collateral equity of State Treasurer
Receivables, net:
Intergovernmental
Other
Due from other State funds
Due from State of Illinois component units
Inventories
Capital assets not being depreciated
Capital assets being depreciated, net
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Intergovernmental payables
Due to other State fiduciary funds
Due to other State funds
Due to State of Illinois component units
Obligations under securities lending of State Treasurer
Unearned revenue
Long term obligations:
Due within one year
Due subsequent to one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for debt service
Restricted for general government
Unrestricted
Total net assets
$
$
The accompanying notes to the financial statements are an integral part of this statement.
6
Governmental
Activities
23,108
52,811
3,849
10,940
3,333
9,417
773,922
1,655
2,142
40,179
211,314
1,132,670
89,700
12,739
1,094
1,556
1,106
10,940
3,675
155,178
483,979
759,967
218,856
3,849
6
149,992
372,703
State of Illinois
DeparlmentofCenuaiManagementServices
Statement of Activities
For the Year Ended June 30, 2011 (Expressed in Thousands)
Functions/Programs
Primary government
Governmental activities
General government
Education
Employment and economic development
Health and social services
Transportation
Public protection and justice
Environment and business regulation
Total governmental activities
General revenues
Appropriations from State Resources
Reappropriation to future year( s)
Lapsed appropriations
Receipts collected and transmitted to State Treasury
Interest and investment income
Other revenues
Capital transfers to other State agencies
Capital contributions
Total general revenues and transfers
Change in net assets
Net assets, July 1, 2010, After change in presentation
Net assets, June 30, 2011
$
Expenses
733,748
1,446
61
3,723
2
4,105
107
743,192
. The accompanying notes to the financial statements are an integral part of this statement.
Program
Revenues
Charges for
Services
$ 663,929
663,929
Net(Expense)Revenues
and Changes in Net
Assets
$
$
Governmental
Activities
(69,819)
(1 ,446)
(61)
(3,723)
(2)
(4,105)
(107)
(79,263)
102,754
(6,388)
(438)
{1 01)
322
11,024
(395)
3,797
110,575
31,312
341,391
372,703
State of Illinois
Department of Central Management Services
Balance Sheet -
Governmental Funds
June 30,2011 (Expressed in Thousands)
Total
General Road Non major Governmental
Fund Fund funds Funds
ASSETS
Unexpended appropriations $ 23,062 $ $ 46 $ 23,108
Cash equity with State Treasurer 2,005 2,005
Receivables, net:
Intergovernmental receivables 22 22
Other receivables 580 4 584
Due from other Department funds 4,916 197 5,113
Due from other State funds 2,564 2,564
Due from State of Illinois component units 34 34
Inventories 343 343
Total assets $ 28,558 $ $ 5,215 $ 33,773
LIABILITIES
Accounts payable and accrued liabilities $ 5,411 $ $ 175 $ 5,586
Intergovernmental payables 58 4 62
Due to other State fiduciary funds 17 17
Due to other Department funds 21,386 1,064 22,450
Due to other State funds 501 17 518
Due to State of Illinois component units 121 1 122
Unavailable revenue 576 576
Matured portion of long-term obligations 208 208
Total liabilities 28,261 1,278 29,539
FUND BALANCES
Nonspendable -Inventory 343 343
Restricted - General Government 6 6
Committed- General Government 3,588 3,588
Unassigned 297 297
Total fund balances 297 3,937 4,234
Total liabilities and fund balances $ 28,558 $ $ 5,215 $ 33,773
The accompanying notes to the financial statements are an integral part of this statement.
8
State of Illinois
Department of Central Management Services
Reconciliation of Governmental Funds Balance Sheet
to Statement of Net Assets
June 30, 2011
(Expressed in Thousands)
Total fund balances-governmental funds
Amounts reported for governmental activities in the
Statement of Net Assets are different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds.
Revenues in the Statement of Activities that do not provide
current financial resources are deferred in the funds.
Internal service funds are used to charge costs of certain
activities to individual funds. The assets and liabilities of the
internal service funds are reported as governmental activities
in the Statement of Net Assets.
Some liabilities reported in the Statement of Net Assets do not
require the use of current financial resources and therefore are
not reported as liabilities in governmental funds. These
liabilities consist of:
Compensated absences (1 ,401}
Auto liability claims ~3,573~
Net assets of governmental activities
The accompanying notes to the financial statements are an integral part of this statement.
9
$ 4,234
95
576
372,772
f4,974~
$ 372,703
State of Illinois
Department of Central Management Services
Statement of Revenues, Expenditures
and Changes in Fund Balances - Governmental Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
Total
General Road Nonmajor Governmental
Fund Fund funds Funds
REVENUES
Other $ 130 $ $ 6,199 $ 6,329
Other charges for services 1,206 1,206
Total revenues 130 7,405 7,535
EXPENDITURES
General government 89,022 3,223 92,245
Education 1,446 1,446
Employment and economic development 61 61
Health and social services 3,723 3,723
Transportation 2 2
Public protection and justice 4,105 4,105
Environment and business regulation 107 107
Capital ouUays 395 395
Total expenditures 98,466 3,618 102,084
Excess (deficiency) of revenues
over (under) expenditures (98,336) 3,787 (94,549}
OTHER SOURCES (USES) OF
FINANCIAL RESOURCES
Appropriations from State resources 95,959 6,795 102,754
Reappropriation to future year(s) (6,388) (6,388)
Lapsed appropriations (438) (438)
Receipts collected and transmitted to State Treasury (101) (101)
Transfers-in 917 917
Transfers-out (917! (917}
Net other sources (uses) of
financial resources 96,337 (510} 95,827
Net change in fund balances (1,999) 3,277 1,278
Fund balances, July 1, 2010, After change in presentation 2,296 1,214 3,510
Increase (decrease) for changes in inventories (554) (554}
FUND BALANCES, JUNE 30, 2011 $ 297 $ $ 3,937 $ 4,234
The accompanying notes to the financial statements are an integral part of this statement.
10
State of Illinois
Department of Central Management Services
Reconciliation of Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to Statement of Activities
For the Year Ended June 30, 2011
(Expressed in Thousands)
Net change in fund balances
Change in inventories
Amounts reported for governmental activities in the Statement of
Activities are different because:
Governmental funds report capital outlays as expenditures while governmental activities report
depreciation expense to allocate those expenditures over the life of the assets. This is the
amount by which capital outlays exceeded depreciation in the current period.
Some capital assets were transferred to other State agencies.
Internal service funds are used to charge the costs of certain activities to individual funds.
The net revenue of the internal service funds is reported as governmental activities in the
Statement of Activities.
Revenues in the Statement of Activities that do not provide current financial resources are not
reported as revenues in the funds. This amount represents the decrease in unavailable
revenue over the prior year.
Some expenses reported in the Statement of Activities do not require the use of current
financial resources and therefore are not reported as expenditures in governmental funds.
Below are such activities.
Increase in compensated absences obligation
Increase in auto liability claims
Change in net assets of governmental activities
The accompanying notes to the financial statements are an integral part of this statement.
11
$
$
1,278
(554)
724
392
(395)
32,216
(42)
(4)
(1,579)
31,312
State of Illinois
Department of Central Management Services
Statement of Net Assets -
Proprietary Funds
June 30, 2011 (Expressed in Thousands)
ASSETS
Cash equity with State Treasurer
Cash and cash equivalents
Securities lending collateral equity of State Treasurer
Receivables, net:
Intergovernmental
Other
Due from other Department funds
Due from other State funds
Due from State of Illinois component units
Inventories
Total current assets
Capital assets not being depreciated
Capital assets being depreciated, net
Total noncurrent assets
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Intergovernmental payables
Due to other State fiduciary funds
Due to other Department funds
Due to other State funds
Due to State of Illinois component units
Obligations under securities lending of State Treasurer
Deferred revenue
Current portion of long-term obligations
Total current liabilities
Noncurrent portion of long-term obligations
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for debt service
Unrestricted
Total net assets
$
$
The accompanying notes to the financial statements are an integral part of this statement.
12
Governmental
Activities -
Internal Service
Funds
50,806
3,849
10,940
3,311
8,833
37,924
771,358
1,621
1,799
890,441
40,137
211,261
251,398
1,141,839
84,114
12,677
1,077
20,587
1,038
984
10,940
3,675
153,534
288,626
480,441
769,067
218,761
3,849
150,162
372,772
State of Illinois
DeparlmentofCenua/ManagementServices
Statement of Revenues, Expenses and Changes in
Fund Net Assets - Proprietary Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
OPERATING REVENUES
Charges for sales and services
Other
Total operating revenues
OPERATING EXPENSES
Cost of sales and services
Claims and judgments
General and administrative
Depreciation
Other
Total operating expenses
Operating income (loss)
NONOPERATING REVENUES (EXPENSES)
Interest and investment income
Interest expense
Other expenses
Income (loss) before contributions
Contributions of capital assets
Change in net assets
Net assets, July 1, 201 0
NET ASSETS, JUNE 30, 2011
$
$
The accompanying notes to the financial statements are an integral part of this statement.
13
Governmental
Activities-
Internal Service
Funds
714,380
4,695
719,075
440,055
187,237
23,373
24,834
12,219
687,718
31,357
322
(3,075)
(185)
28,419
3,797
32,216
340,556
372,772
State of Illinois
Department of Central Management Services
Statement of Cash Flows -
Proprietary Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales and services
Cash received from transactions with other funds
Cash payments to suppliers for goods and services
Cash payments to employees for services
Cash payments for workers compensation
Cash receipts from other operating activities
Net cash provided (used) by operating activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Other noncapital financing activities
Net cash provided (used) by noncapital financing activities
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition and construction of capital assets
Principal paid on capital debt
Interest paid on capital debt
Net cash (used) by capital and related financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends on investments
Net cash provided (used) by investing activities
Net Increase (decrease) In cash and cash equivalents
Cash and cash equivalents, July 1, 2010
CASH AND CASH EQUIVALENTS, JUNE 30, 2011
Reconciliation of cash and cash equivalents to the statement of net assets:
Total cash and cash equivalents per the statement of net assets
Add: cash equity with State Treasurer
CASH AND CASH EQUIVALENTS, JUNE 30, 2011
Reconciliation of operating income (loss) to net
cash provided (used) by operating activities:
OPERATING INCOME (LOSS)
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:
Depreciation
Provision for uncollectible accounts
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(Increase) decrease in intergovernmental receivables
(Increase) decrease in due from other funds
(Increase) decrease in due from State of Illinois component units
(Increase) decrease in inventory
Increase (decrease) in accounts payable and accrued liabilities
Increase (decrease) in intergovernmental payables
Increase (decrease) in due to other State funds
Increase (decrease) in due to State of Illinois component units
Increase (decrease) in deferred revenues
Increase (decrease) in other liabilities
Total adjustments
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
Loss on sale of equipment
Transfer of capital assets, net of related debt, to/from other State funds
The accompanying notes to the financial statements are an integral part of this statement
14
Governmental
Activities-
Internal Service
Funds
$ 20,188
672,074
(419,168)
(120,037)
(126,944)
17
26130
(1,726l
(1,726l
(7,313)
(6,753)
!1.802l
{1U68l
323
323
8,859
45796
$ 54655
$ 3,849
50806
$ 54,655
$ 31357
24,834
21
3,215
(2,116)
(37,527)
5
(120)
(28,734)
473
(21,312)
501
2,245
53288
(5.227}
$ 26130
$ (167)
$ 3,779
State of Illinois
Department of Central Management Services
Statement of Fiduciary Net Assets
June 30, 2011 (Expressed in Thousands)
ASSETS
Cash equity with State Treasurer
Cash and cash equivalents
Investments:
Equities
Fixed income
Other
Other receivables, net
Securities lending collateral equity of State Treasurer
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Intergovernmental payables
Due to other State fiduciary funds
Due to other State funds
Obligations under securities lending of State Treasurer
Long-term liabilities
Total liabilities
NET ASSETS
Held in trust for:
Deferred compensation benefits
Total net assets
Pension Trust
Fund
State
Employees'
Deferred
Compensation
Plan
$
$
5,594
2,412
2,255,209
284,930
786,840
939
1,892
3,337,816
889
2
6
29
1,892
127
2,945
3,334,871
3,334,871
The accompanying notes to the financial statements are an integral part of this statement
15
Agency Funds
$
$
$
$
10,587
4,070
4,937
19,594
14,642
15
4,937
19,594
State of Illinois
Department of Central Management Services
Statement of Changes in Fiduciary Net Assets
For the Year Ended June 30, 2011 (Expressed in Thousands)
Deposits/Contributions:
Members/participants
Other contributions
Total contributions
Investment income:
Interest, dividends and other investment income
Net appreciation of investments
Reimbursement of investment expenses not separable from investment income
Less: investment expense
Net investment income
Total additions
Deductions:
Benefit payments
Refunds
General and administration
Total deductions
Net additions
Net assets, July 1, 201 0
Net assets, JUNE 30, 2011
The accompanying notes to the financial statements are an integral part of this statement.
16
Pension Trust
Fund
State
Employees'
Deferred
Compensation
Plan
$ 166,814
5,269
172,083
86,591
514,999
2,535
~567~
603,558
775,641
184,726
42
2,970
187,738
587,903
2,746,968
$ 3,334,871
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(1) Organization
The Department of Central Management Services (the Department) is a part of the executive branch of
government of the State of Illinois (State) and operates under the authority of and review by the
Illinois General Assembly. The Department operates under a budget approved by the General
Assembly in which resources are appropriated for the use of the Department. Activities of the
Department are subject to the authority of the Office of the Governor, the State's chief executive
officer, and other departments of the executive and legislative branches of government (such as the
Governor's Office of Management and Budget, the State Treasurer's Office, and the State
Comptroller's Office) as defined by the Illinois General Assembly. All funds appropriated to the
Department and all other cash received are under the custody· and control of the State Treasurer, with
the exception of the Facilities Management Fund, the State Employees' Deferred Compensation Plan,
and the Flexible Spending Account.
The Department provides a variety of centralized services for the operation of State Government. The
Department provides personnel services for State agencies; purchases goods and services for State
agencies; supplies telecommunications, data processing, videoconferencing, and office automation;
manages state property, and disseminates information about State Government to the news media and
general public. It employs volume purchasing and economies of scale to reduce costs and improve
government efficiency. The Department also promotes the economic development of minority and
female businesses and rehabilitation facilities for persons with disabilities.
(l) Summary of Significant Accounting Policies
The financial statements of the Department have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP), as prescribed by the
Governmental Accounting Standards Board (GASB). To facilitate the understanding of data included
in the financial statements, summarized below are the more significant accounting policies.
(a) Financial Reporting Entity
As defined by GAAP, the financial reporting entity consists of a primary government, as well as
its component units, which are legally separate organizations for which the elected officials of the
primary government are financially accountable. Financial accountability is defined as:
1) Appointment of a voting majority of the component unit's board and either (a) the
primary government's ability to impose its will, or (b) the possibility that the component
unit will provide a financial benefit to or impose a financial burden on the primary
government; or
2) Fiscal dependency on the primary government.
Based upon the required criteria, the Department has no component units and is not a component
unit of any other entity. However, because the Department is not legally separate from the State
of Illinois, the financial statements of the Department are included in the financial statements of
17
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
the State of Illinois. The State of Illinois' Comprehensive Annual Financial Report may be
obtained by writing to the State Comptroller's Office, Financial Reporting Department, 325 West
Adams Street, Springfield, Illinois, 62704-1871.
(b) Basis of Presentation
The financial statements of the State of Illinois, Department of Central Management Services, are
intended to present the financial position, the changes in financial position, and the cash flows,
when applicable, of only that portion of the governmental activities, each major fund of the State
of Illinois, and the aggregate remaining fund information of the State of Illinois that is
attributable to the transactions of the Department. They do not purport to, and do not, present
fairly the financial position of the State of Illinois as of June 30, 2011, and the changes in
financial position and cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Government-wide Statements. The government-wide statement of net assets and statement of
activities report the overall financial activity of the Department, excluding fiduciary activities.
Eliminations have been made to minimize the double-counting of internal activities of the
Department. The financial activities of the Department consist only of governmental activities,
which are primarily supported by taxes, charges for services, and intergovernmental revenues.
The statement of net assets presents the assets and liabilities of the Department's governmental
activities with the difference being reported as net assets. The assets and liabilities are presented
in order of their relative liquidity by class of asset or liability with liabilities whose average
maturities are greater than one year reported in two components - the amount due within one year
and the amount due in more than one year.
The statement of activities presents a comparison between direct expenses and program revenues
for the general government function of the Department's governmental activities. Direct
expenses are those that are clearly identifiable with a specific function. Program revenues
include charges paid by the recipients of goods or services offered by the programs. Revenues
that are not classified as program revenues, including sales of surplus State property, are
presented as general revenues.
Fund Financial Statements. The fund financial statements provide information about the
Department's funds, including fiduciary funds. Separate statements for each fund category -
governmental, proprietary, and fiduciary - are presented. The emphasis on fund financial
statements is on major governmental funds, each displayed in a separate column. All remaining
governmental funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange
transactions associated with the principal activity of the fund. Exchange transactions are those in
which each party receives and gives up essentially equal values. Nonoperating revenues, such as
subsidies and investment earnings, result from nonexchange transactions or ancillary activities.
18
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
The Department administers the following major governmental funds (or portions thereof in the
case of shared funds)- see the State oflllinois' Comprehensive Annual Financial Report:
General- This is the State's primary operating fund. It accounts for all financial resources
of the general government, except those required to be accounted for in another fund. The
services which are administered by the Department and accounted for in the general fund
include, among others, general government services.
Road- This fund accounts for the activities of the Department for payment to the Workers'
Compensation Revolving Fund, an internal service fund, for allocated costs associated with
providing workers'compensation benefits for State employees paid from the Road Fund.
Additionally, the Department reports the following fund types:
Governmental Fund Types:
Special Revenue - These funds account for and report the proceeds of specific revenue
sources that are restricted or committed to expenditure for specified purposes other than debt
service or capital projects. Special revenue funds account for, among other things, federal
grant programs, taxes levied with statutorily defined distributions and other resources
restricted as to purpose.
Capital Projects- These funds account for and report financial resources that are restricted,
committed, or assigned to expenditure for capital outlays, including acquisition or
construction of capital facilities and other assets. Such resources are derived principally from
proceeds of general and special obligation bond issues and certificates of participation.
Proprietary Fund Types:
Internal Service - These funds account for data processing, printing, fleet management,
facilities management, professional services, workers compensation claims, life insurance
payments for State employees, and telecommunications provided to agencies of the State on a
reimbursement basis.
Fiduciary Fund Types:
Pension Trust- The State Employees' Deferred Compensation plan is reported as a pension
(and other employee benefit) trust fund in order to account for resources required to be held
in trust for the members in accordance with Illinois Compiled Statutes (40 ILCS 5/24-101)
and Section 457 of the Internal Revenue Code.
Agency - These funds account for amounts in which the Department acts in the capacity of
an agent and collects and distributes employee payroll withholdings for purchase of life
insurance, tax-free payments of eligible medical and dental expenses, and tax-free payments
of eligible child and/or adult day care costs.
19
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(c) Measurement Focus and Basis of Accounting
The government-wide, proprietary, and fiduciary fund financial statements are reported using the
economic resources measurement focus (except for agency funds which do not have a
measurement focus) and the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded at the time liabilities are incurred, regardless of when the related cash flow
takes place. Nonexchange transactions, in which the Department gives (or receives) value
without directly receiving (or giving) equal value in exchange, include grants and donations.
Revenue from grants and donations are recognized in the fiscal year in which all eligibility
requirements imposed by the provider have been met.
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible
within the current period or soon enough thereafter to pay liabilities of the current period. For
this purpose, the State considers revenues to be available if they are collected within 60 days of
the end of the current fiscal year. Expenditures generally are recorded when the liability is
incurred, as under accrual accounting. However, principal and interest on formal debt issues,
claims and judgments, and compensated absences are recorded only when payment is due.
Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of
general long-term debt and acquisitions under capital leases are reported as other financing
sources.
Significant revenue sources which are susceptible to accrual include interest and other charges for
services. All other revenue sources including fines, penalties, licenses and other miscellaneous
revenues are considered to be measurable and available only when cash is received.
Private-sector standards of accounting and financial reporting issued prior to December I, 1989,
generally are followed in the government-wide and proprietary fund financial statements to the
extent that those standards do not conflict with or contradict guidance of the Governmental
Accounting Standards Board.
(d) Shared Fund Presentation
The financial statement presentation for the General Fund, the Road Fund, and the Capital
Development Fund, a nonmajor governmental fund, represent only the portion of shared funds
that can be directly attributed to the operations of the Department. Financial statements for total
fund operations of the shared State funds are presented in the State of Illinois' Comprehensive
Annual Financial Report.
In presenting these financial statements, certain unique accounts are used for the presentation of
shared funds. The following accounts are used in these financial statements to present the
Department's portion of shared funds:
20
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Unexpended Appropriations
This "asset" account represents lapse period warrants issued between July and August
annually in accordance with the Statewide Accounting Management System (SAMS) records
plus any liabilities relating to obligations re-appropriated to the subsequent fiscal year.
Appropriations from State Resources
This "other financing source" account represents the final legally adopted appropriation
according to SAMS records.
Lapsed Appropriations
Lapsed appropriations are the legally adopted appropriations less net warrants issued for the
14 month period from July to August of the following year and re-appropriations to
subsequent years according to SAMS records.
Reappropriation to Future Year(s)
This contra revenue account reduces current year's appropriations by the amount of the
reappropriation to reflect the State's realignment of the budgetary needs to the subsequent
year and avoid double counting of a portion of the appropriation in more than one fiscal year.
Receipts Collected and Transmitted to State Treasury
This "other financing use" account represents all cash receipts received during the fiscal year
from SAMS records.
(e) Eliminations
Eliminations have been made in the government-wide statement of net assets to minimize the
"grossing-up" effect on assets and liabilities within the governmental activities column of the
Department. As a result, amounts reported in the governmental funds balance sheet as
interdepartmental interfund receivables and payables have been eliminated in the government­wide
statement of net assets. Amounts reported in the governmental funds balance sheet and
proprietary statement of net assets as receivable from or payable to fiduciary funds have been
included in the government-wide statement of net assets as receivable from and payable to
external parties, rather than as internal balances.
21
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(f) Cash and Cash Equivalents
Cash equivalents are defined as short-term, highly liquid investments readily convertible to cash
with maturities of 90 days or less at time of purchase. Cash equivalents include cash on hand,
petty cash funds, and cash in banks for locally held funds.
(g) Inventories
Inventories of the State Garage Revolving Fund, consisting primarily of automotive parts,
accessories, and supplies, are valued at cost, principally on the weighted average method.
Significant inventories of governmental funds, which consist primarily of federal surplus vehicles
held for resale, are recorded as expenditures when consumed or sold rather than when purchased.
(h) Interfund Transactions
The Department has the following types of interfund transactions between Department funds and
funds of other State agencies:
Services provided and used-sales and purchases of goods and services between funds for a
price approximating their external exchange value. Interfund services provided and used are
reported as revenues in seller funds and expenditures or expenses in purchaser funds. Unpaid
amounts are reported as interfund receivables and payables in the governmental funds
balance sheet or the government-wide and proprietary fund statements of net assets.
Reimbursements-repayments from the funds responsible for particular expenditures or
expenses to the funds that initially paid for them. Reimbursements are reported as
expenditures in the reimbursing fund and as a reduction of expenditures in the reimbursed
fund.
Transfers-flows of assets (such as cash or goods) without equivalent flows of assets in
return and without a requirement for repayment. In governmental funds, transfers are reported
as other financing uses in the funds making transfers and as other financing sources in the
funds receiving transfers. In proprietary funds, transfers are reported after nonoperating
revenues and expenses.
The Department also has activity with various component units of the State of Illinois for
professional services rendered and on-behalf employee benefits paid.
(i) Capital Assets
Capital assets, which consist of equipment, automobiles, and real property, are reported at cost or
estimated historical cost based on appraisals. Contributed assets are reported at estimated fair
value at the time received. Capital assets are depreciated using the straight-line method.
22
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Capitalization thresholds and the estimated useful lives are as follows:
Capital Asset Category Capitalization Estimated
Threshold Useful Life
Land $100,000 N/A
Land Improvements 25,000 N/A
Buildings 100,000 10-60
Building Improvements 25,000 10-45
Site Improvements 25,000 20
E_guipment 5,000 3-25
OJ Compensated Absences
The liability for compensated absences reported in the government-wide, proprietary and
fiduciary fund financial statements consists of unpaid, accumulated vacation and sick leave
balances for Department employees. A liability for these amounts is reported in governmental
funds only if they have matured, for example, as a result of employee resignations and
retirements. The liability has been calculated using the vesting method, in which leave amounts
for both employees who currently are eligible to receive termination payments and other
employees who are expected to become eligible in the future to receive such payments upon
termination are included. The liability has been calculated based on the employees' current
salary level and includes salary related costs (e.g., Social Security and Medicare taxes).
Legislation that became effective January 1, 1998 capped the paid sick leave for all State
Employees' Retirement System members at December 31, 1997. Employees continue to accrue
twelve sick days per year, but will not receive monetary compensation for any additional time
earned after December 31, 1997. Sick days earned between 1984 and December 31, 1997 (with a
50% cash value) would only be used after all days with no cash value are depleted. Any sick
days earned and unused after December 31, 1997 will be converted to service time for purposes
of calculating employee pension benefits.
(k) Fund Balances
In the fund financial statements, governmental funds report fund balances in the following
categories:
Nonspendable- This consists of amounts that cannot be spent because they are either a) not in
spendable form or b) legally or contractually required to be maintained intact.
Restricted- This consists of amounts that are restricted to specific purposes, that is, when
constraints placed on the use of resources are either: a) externally imposed by creditors, grantors,
contributors, or laws or regulations of other governments or b) imposed by law through
constitutional provisions or enabling legislation.
23
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Committed- This consists of amounts that can only be used for specific purposes pursuant to
constraints imposed by formal action of the Department's highest level of decision-making
authority. Committed amounts cannot be used for any other purpose unless the Department
removes or changes the specified use by taking the same type of action it employed to previously
commit those amounts. The Department's highest level of decision-making authority rests with
the Illinois State legislature and the Governor. The State passes "Public Acts", to commit their
fund balances.
Assigned- This consists of net amounts that are constrained by the Department's intent to be used
for specific purposes, but that are neither restricted not committed.
Unassigned- This consists of residual deficit fund balance that has not been restricted,
committed, or assigned within the general fund and deficit fund balances of other governmental
funds.
When both restricted and unrestricted (committed, assigned, and unassigned) resources are
available for use, it is the Department's policy to use restricted resources first. When only
unrestricted resources are available, the Department uses committed resources first, followed by
assigned, and then unassigned.
(I) Net Assets
In the government-wide and proprietary fund financial statements, equity is displayed in three
components as follows:
Invested in Capital Assets, Net of Related Debt - This consists of capital assets, net of
accumulated depreciation, less the outstanding balances of any bonds, mortgages, notes, or
other borrowings that are attributable to the acquisition, construction, or improvement of
those assets.
Restricted- This consists of net assets that are legally restricted by outside parties or by law
through constitutional provisions or enabling legislation. When both restricted and
unrestricted resources are available for use, generally it is the State's policy to use restricted
resources first, then unrestricted resources when they are needed.
Unrestricted- This consists of net assets that do not meet the definition of "restricted" or
"invested in capital assets, net of related debt."
The government-wide statement of net assets reports $3.855 million of restricted net assets which
are restricted by enabling legislation.
24
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(m) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
(n) State Employees' Deferred Compensation Plan Administration
By State statute the Department is responsible for administering the State Employees' Deferred
Compensation Plan (Plan). The Department contracts with Invesco Ltd. for investment
management services and T. Rowe Price Retirement Plan Services, Inc. to provide recordkeeping
services for the Plan. Additional investment management fees are paid to mutual fund managers
before any dividends are declared in accordance with customary industry practices. Asset
charges intended to cover the costs of administration, including investment management and
recordkeeping fees, are computed monthly and withdrawn from participants' accounts on a
monthly or quarterly basis. Effective January I, 2007, the annual fee charged to participants was
limited to a maximum of$30. This fee has been waived for 2008 through 2011.
(o) New Accounting Pronouncements
Effective for the year ending June 30, 2011 the Department adopted Governmental Accounting
Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Definitions, which established fund balance classifications that comprise a hierarchy based
primarily on the extent to which a government is bound to observe constraints imposed upon the
use of the resources reported in governmental funds. There was no significant impact on the
Department's financial statements as a result of adopting this Statement; however, this Statement
clarified the definitions of the governmental fund types.
Effective for the year ending June 30, 2011 the Department adopted Governmental Accounting
Standards Board Statement No. 59, Financial Instruments Omnibus, which established reporting
and disclosure requirements of certain financial instruments and external investment pools for
which significant issues have been identified in the past. There was no impact on the
Department's financial statements as a result of adopting this Statement.
(p) Future Adoption ofGASB Statements
Effective for the year ending June 30, 2012 the Department will adopt Governmental Accounting
Standards Board Statement No. 57, OPEB Measurements by Agent Employers and Agent
Multiple-Employer Plans, which allows the use of the alternative measurement method for
employers with individual-employer OPEB plans with fewer than I 00 total plan members and
clarifies the frequency and timing requirements of actuarially determined OPEB measurements by
employers that participate in agent multiple-employer OPEB plans. The Department has not yet
determined the impact on the Department's financial statements as a result of adopting this
Statement.
25
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Effective for the year ending June 30, 2012 the Department will adopt Governmental Accounting
Standards Board Statement No. 64 Derivative Instruments: Application of Hedge Accounting
Termination Provisions, which sets forth criteria to establish when the effective hedging
relationship continues and hedge accounting should continue to be applied. The Department has
not yet determined the impact on the Department's financial statements as a result of adopting this
Statement.
(3) Deposits and Investments
(a) Deposits
The State Treasurer is the custodian of the State's cash and cash equivalents for funds maintained
in the State Treasury. Deposits in the custody of the State Treasurer are pooled and invested with
other State funds in accordance with the investment authority and guidelines for the Treasurer's
published investment policy found in Section 22.8 of the Deposit of State Moneys Act (15 ILCS
520/11). Funds held by the State Treasurer have not been categorized as to credit risk because
the Department does not own individual securities. Detail on the nature of these deposits and
investments is available within the State of Illinois' Comprehensive Annual Financial Report.
Funds maintained outside the State Treasury have independent statutory authority to manage their
own deposits and investments. The investment authority of the Illinois State Board of
Investments ("ISBI") is governed by the Illinois Pension Code ( 40 ILCS 5). ISBI has published
investment policies incorporating these guidelines.
The carrying amount and bank balance of cash deposits held outside of the State Treasury at June
30,2011 was $1.358 million which was uninsured and uncollateralized.
(b) Investments
The Department's investments consist of amounts held by trustees in accordance with debt
covenants; tax-free payments of eligible medical and dental expenses, tax-free payments of
qualified transportation and/or commuting expenses, and tax-free payments of eligible child
and/or adult day care costs; and amounts held as part of the State's employee retirement savings
plan in accordance with Section 457 of the Internal Revenue Code. The investments held for the
State's Section 457 plan are held in mutual funds, annuities, investment contracts and equity trust
funds, which are selected by the Illinois State Board of Investments after satisfactory review of
such factors as the investment experience of the underlying manager, the suitability of the
investment approach used, and the investment record.
As of June 30, 2011, the Department had the following fixed income investments outside of the
State Treasury:
26
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Weighted
Book Fair Average
Value Value Maturity
(Thousands) (Thousands) (Years)
Governmental Activities
Money market mutual funds $ 2,491 $ 2,491 0.096
Total fixed income investments $ 2,491 $ 2,491
Fiduciary Funds
Money market mutual funds $ 89,728 $ 90,180 0.154
Debt mutual funds 107,223 107,223 7.400
Total fixed income investments $ 196,951 $ 197,403
Interest Rate Risk: The Department does not have a formal investment policy that limits
investment maturities as a means of managing its exposure to fair value losses arising from
increasing interest rates.
Credit Risk: The Department does not have a formal investment policy that limits investment
choices. The Governmental Activities money market mutual funds were rated Aaa by Moody's.
$4.522 million of the Fiduciary Funds money market mutual funds were rated Aaa by Moody's,
while the remaining $85.658 million of the money market mutual funds were unrated. The
Fiduciary Funds debt mutual funds were unrated.
(c) Reconciliation to Statement of Net Assets and Statement of Fiduciary Net Assets
The Statement ofNet Assets and Statement of Fiduciary Net Assets cash and cash equivalents
contain certain short-term investments (included as investments above) to reflect their liquidity.
A reconciliation (amounts expressed in thousands) follows:
27
(d)
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Governmental Activities Deposits Investments
Amounts Per Note $ 1,358 $ 2,491
Cash equivalents 2,491 ~2,491~
Amounts per Statement
of Net Assets $ 3,849 $
Fiduciary Funds Deposits Investments
Amounts Per Note $ $ 196,951
Cash equivalents 6,482 (6,482)
Equity mutual funds 1,483,562
Blended mututal funds 516,361
Annuities 1,064
Equity trust funds 255,286
Bond trust funds 94,461
Guaranteed investment contracts 785,776
Amounts per Statement
of Fiduciary Net Assets $ 6,482 $ 3,326,979
Securities Lending Transactions
Under the authority of the Treasurer's published investment policy that was developed in
accordance with the State statute, the State Treasurer lends securities to broker-dealers and other
entities for collateral that will be returned for the same securities in the future. The State
Treasurer has, through a Securities Lending Agreement, authorized Deutsche Bank Group to lend
the State Treasurer's securities to broker-dealers and banks pursuant to a form of loan agreement.
During fiscal year 2011 and 2010, Deutsche Bank Group lent U.S. Agency securities, U.S.
Treasury Bills, and U.S. Agency Discount Notes and received as collateral U.S. dollar
denominated cash. Borrowers were required to deliver collateral for each loan equal to at least
100% of the aggregate market value of the loaned securities. Loans are marked to market daily.
If the market value of collateral falls below I 00%, the borrower must provide additional collateral
to raise the market value to I 00%.
The State Treasurer did not impose any restrictions during the fiscal year on the amount of the
loans available on the eligible securities. In the event of borrower default, Deutsche Bank Group
provides the State Treasurer with counterparty default indemnification. In addition, Deutsche
Bank Group is obligated to indemnify the State Treasurer if Deutsche Bank Group loses any
securities, collateral or investments of the State Treasurer in Deutsche Bank Group's custody.
28
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or
Deutsche Bank Group.
During the fiscal year, the State Treasurer and the borrowers maintained the right to terminate all
securities lending transactions on demand. The cash collateral received on each loan was
invested in repurchase agreements with approved counterparties collateralized with securities
approved by Deutsche Bank Group and marked to market daily at no less than I 02%. Because
the loans are terminable at will, their duration did not generally match the duration of the
investments made with cash collateral. The State Treasurer had no credit risk as a result of its
securities lending program as the collateral held exceeded the fair value of the securities lent.
Securities on loan are reported at fair value with the exception of U.S. Treasury Bills and U.S.
Agency Discount notes which are reported at amortized cost.
In accordance with GASB Statement No. 28, paragraph 9, the Office of the State Treasurer has
allocated the assets and obligations arising from the securities lending agreements as of June 30,
2011, to the various funds of the State. The total allocated to the Department was $17.769
million at June 30, 2011.
(4) lnterfund Balances and Activity
(a) Balances Due to/from Other Funds
The following balances (amounts expressed in thousands) at June 30,2011 represent amounts due
from other Department and State of Illinois funds.
Fund
General
Non-major
governmental
funds
Internal service
funds
Due from
Other
Department
Funds
$ 4,916
197
37,924
$ 43,037
29
$
Other
State
Funds Description/Purpose
Due from other Department funds for
reimbursement of advances on
expenditures incurred.
2,564 Due from other Department funds and
other State funds for sales of federal
surplus property.
771,358 Due from other Department funds and
other State funds for services provided.
$773,922
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
The following balances (amounts expressed in thousands) at June 30, 2011 represent amounts due
to other Department and State of Illinois funds.
Due to
Other Other State
Department Other State Fiduciary
Fund Funds Funds Funds Descrij!tion/P u rl!ose
General $ 21,386 $ 501 $ Due to other Department funds for
internal service fund services
received including workers
compensation claims and other State
funds for services received.
Non-major 1,064 17 17 Due to other Department funds for
governmental internal service fund services
funds received, other State funds for
services received and other State
fiduciary funds for retirement
contributions.
Internal service 20,587 1,038 1,077 Due to other Department funds for
funds internal service fund services
received, other State funds for
services received and other State
fiduciary funds for retirement
contributions.
Fiduciary funds 29 6 Due to other State funds for audit and
other expenses and other State
fiduciary funds for retirement
contributions.
$ 43,037 $ 1,585 $ 1,100
30
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(b) Transfers to/from Other Funds
Interfund transfers in (amounts expressed in thousands) from other State funds for the year ended
June 30, 2011, were as follows:
Fund
General
Transfen in from
Other
Department
Funds Description/Purpose
Transfer from other Department funds pursuant to
$ 917 statute. ========
Interfund transfers out (amounts expressed in thousands) to other State funds for the year ended
June 30,2011, were as follows:
Fund
Non-major
governmental
funds
(5) Capital Assets
Transfers out to
Other
Department
Funds Description/Purpose
Transfer to other Department funds pursuant to
$ 917 statute.
=====
Capital asset activity (amounts expressed in thousands) for the year ended June 30, 2011 was as
follows:
31
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Balance Net Balance
Ju!l: 112010 Additions Deletions Transfers June 301 2011
Governmental activities:
Capital assets not being
depreciated:
Land and land improvements $ 38,407 $ $ $ $ 38,407
Nondepreciable historical
treasures and works of art 4 4
Construction in Progress 11768 1 768
Total capital assets not
being depreciated 38411 11768 40179
Capital assets being depreciated:
Site improvements 3,889 3,889
Buildings and building
improvements 456,491 549 3,229 460,269
Equipment 200,552 4,367 13,129 2,258 194,048
Depreciable historical treasures
and works of art 970 970
Other Intangible Assets-Fiber Optic Rights 11024 1024
Total capital assets being
depreciated 6611902 51940 131129 51487 6601200
Less accumulated depreciation:
Site improvements 2,778 175 2,953
Buildings and building
improvements 254,669 12,342 267,011
Equipment 176,491 12,303 12,962 2,103 177,935
Depreciable historical treasures
and works of art 970 970
Other Intangible Assets-Fiber Optic Rights 17 17
Total accumulated
depreciation 434 908 241837 121962 21103 4481886
Total capital assets being
depreciated, net 2261994 (181897} 167 31384 2111314
Governmental activity
capital assets, net $ 265.405 $(17.129) $ 167 $ 3.384 $ 251.493
Depreciation expense for governmental activities (amounts expressed in thousands) for the year ended
June 30,201 I was charged to functions as follows:
General government $ 24,837
32
(6)
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Long-Term Obligations
(a) Changes in Long-Term Obligations
Changes in long-term obligations (amounts expressed in thousands) for the year ended June 30,
2011 were as follows:
Balance Balance Amounts
July 1, June30, Due Within
2010 Additions Deletions 2011 One Year
Governmental activities:
Compensated absences $ 14,410 $ 8,005 $ 9,032 $ 13,383 $ 823
Capital lease obligations 233 68 165 71
Installment purchase obligations 9,559 3,865 5,694 3,940
Certificates of participation 27,830 2,820 25,010 2,985
Workers' compensation
claim obligations 536,805 182,558 128,239 591,124 145,791
Auto liability claim
obligations 2,059 2,905 1,183 3,781 1,568
Total governmental activities $ 590,896 $ 193,468 $ 145,207 $ 639,157 $ 155,178
Compensated absences have been liquidated by the applicable fund that accounts for the salaries
and wages of the related employees.
33
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(b) Capital/ease obligations
(c)
The Department leases office space with a historical cost and accumulated deprecation of $1.462
and $.646 million, respectively, under capital lease arrangements. Although lease terms vary,
certain leases are renewable subject to appropriation by the General Assembly. If renewal is
reasonably assured, leases requiring appropriation by the General Assembly are considered non­cancelable
leases for financial reporting. Future minimum lease payments (amounts expressed in
thousands) at June 30, 2011 are as follows:
Year Ending
June30 Princi(!al Interest Total
2012 $ 71 $ 7 $ 78
2013 75 4 79
2014 19 19
$ 165 $ 11 $ 176
Installment purchase obligations
The Department has acquired certain vehicles, electronic data processing and data storage
equipment, and communication and video equipment through installment purchase arrangements.
Future debt service requirements under installment purchase contracts (amounts expressed in
thousands) at June 30, 2011, are as follows:
Year Ending
June 30 Princi(!al Interest Total
2012 $ 3,940 $ 112 $ 4,052
2013 1,754 18 1,772
$ 52694 $ 130 $ 52824
34
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(d) Certificates of participation
The Department has financed the purchase of office buildings and land. The office buildings
have a historical cost and accumulated deprecation of$48.740 and $16.194 million, respectively
and the land has a historic cost of $2.794 million. This non-state issued certificate is sold by a
private concern and is repaid by Department appropriations pursuant to an installment purchase
agreement. Future debt service requirements under certificates of participation (amounts
expressed in thousands) at June 30, 2011, are as follows:
June30 Princi2al Interest Total
2012 $ 2,985 $ 1,406 $ 4,391
2013 3,160 1,224 4,384
2014 3,350 1,031 4,381
2015 3,545 824 4,369
2016 3,755 606 4,361
2017-2018 81215 501 8,716
$ 252010 $ 52592 $ 302602
(7) Risk Management
The Department administers the State of Illinois' risk management except for minimal commercial
insurance purchased on certain capital assets by other State agencies and auto liability for the
Department of Transportation. The State is exposed to various risks of loss related to torts; theft of,
damage to, and destruction of assets; errors and omissions; workers compensation; auto liability
exposure; and natural disasters. The State retains the risk of loss (i.e. self insured) for these risks
except minimal commercial insurance purchased on certain capital assets by other State agencies.
There were no significant reductions in insurance coverage for the State from the prior fiscal year.
The amount of settlements has not exceeded insurance coverage in the past three fiscal years for the
State.
Liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be
reasonably estimated. Liabilities include an amount for claims that have been incurred but not
reported (IBNR). Claims liabilities are based upon the estimated ultimate cost of settling the claims
including specific, incremental claim adjustment expenses, salvage, and subrogation and considering
the effects of inflation and recent claim settlement trends including frequency and amount of payouts
and other economic and social factors.
35
(8)
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
The Department's risk financing of auto liability for the State's non-Department of Transportation
liability, $3.781 million, has been determined using an estimate of claims outstanding. Claims that
will be liquidated with expendable available financial resources have been recorded as a liability in the
General Revenue Fund, a subaccount of the General Fund, in the amount of $208 thousand. The
remaining portion of the liability, $3.573 million, as of June 30, 2011, is included in the Department­wide
financial statements and is expected to be paid from future resources of the General Fund.
The Department's workers' compensation liability, $591.124 million, has been determined using
claims outstanding and a projection of claims to be submitted, based upon prior years experience, to
the Department. The liability is recorded in the Workers' Compensation Revolving Fund, an internal
service fund.
The following is a reconciliation of the Department's claims liabilities for the years June 30, 2010 and
June 30, 2011 (amounts expressed in thousands).
Changes in Claims Liabilit;r Balances
Current Year
Claims and
Year Ended Beginning Changes in Claim Ending
June30 Balance Estimates Payments Balance
Primary Government-Governmental Activities:
2010
Auto Liability $ 1,869 $ 1,761 $ 1,571 $ 2,059
Workers' Compensation 397,935 258,817 119,947 536,805
Total $ 399,804 $ 260,578 $ 121,518 $ 538,864
2011
Auto Liability $ 2,059 $ 2,905 $ 1,183 $ 3,781
Workers' Compensation 536,805 182,558 128,239 591,124
Total $ 538,864 $ 185,463 $ 129,422 $ 594,905
Pension Plan
Substantially all of the Department's full-time employees who are not eligible for participation in
another state-sponsored retirement plan participate in the State Employees' Retirement System (SERS),
which is a pension trust fund in the State of Illinois reporting entity. The SERS is a single-employer
defined benefit public employee retirement system (PERS) in which State employees participate,
exceptthose covered by the State Universities, Teachers', General Assembly, and Judges' Retirement
36
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Systems. The financial position and results of operations of the SERS for fiscal year 2011 are
included in the State of Illinois' Comprehensive Annual Financial Report (CAFR) for the year ended
June 30, 2011. The SERS issues a separate CAFR that may be obtained by writing to the SERS, 2101
South Veterans Parkway, Springfield, Illinois, 62794-9255.
A summary of SERS benefit provisions, changes in benefit provisions, employee eligibility
requirements including eligibility for vesting, and the authority under which benefit provisions are
established are included as an integral part of the SERS' CAFR. Also included is a discussion of
employer and employee obligations to contribute and the authority under which those obligations are
established.
The Department pays employer retirement contributions based upon an actuarially determined
percentage of their payrolls. For fiscal year 2011, the employer contribution rate was 27.988%.
Effective for pay periods beginning after December 31, 1991, the State opted to pay the employee
portion of retirement for most State agencies (including the Department) with employees covered by
the State Employees' and Teachers' Retirement Systems. However, effective with the fiscal year 2004
budget, the State opted to stop paying the portion or a part of the portion of retirement for many State
agencies (including the Department) for certain classes of employees covered by the State Employees'
and Teachers' Retirement Systems. The pickup, when applicable, is subject to sufficient annual
appropriations and those employees covered may vary across employee groups and State agencies.
(9) Post-employment Benefits
The State provides health, dental, vision, and life insurance benefits for retirees and their dependents in
a program administered by the Department of Healthcare and Family Services along with the
Department of Central Management Services. Substantially all State employees become eligible for
post-employment benefits if they eventually become annuitants of one of the State sponsored pension
plans. Health, dental, and vision benefits include basic benefits for annuitants and dependents under
the State's self-insurance plan and insurance contracts currently in force. Annuitants may be required
to contribute towards health, dental, and vision benefits with the amount based on factors such as date
of retirement, years of credited service with the State, whether the annuitant is covered by Medicare,
and whether the annuitant has chosen a managed health care plan. Annuitants who retired prior to
January 1, 1998, and who are vested in the State Employee's Retirement System do not contribute
towards health, dental, and vision benefits. For annuitants who retired on or after January 1, 1998, the
annuitant's contribution amount is reduced five percent for each year of credited service with the State
allowing those annuitants with twenty or more years of credited service to not have to contribute
towards health, dental, and vision benefits. Annuitants also receive life insurance coverage equal to
the annual salary of the last day of employment until age 60, at which time the benefit becomes
$5,000.
37
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
The total cost of the State's portion of health, dental, vision, and life insurance benefits of all members,
including post-employment health, dental, vision, and life insurance benefits, is recognized as an
expense by the State in the Illinois Comprehensive Annual Financial Report. The State finances the
costs on a pay-as-you-go basis. The total costs incurred for health, dental, vision, and life insurance
benefits are not separated by department or component unit for annuitants and their dependents nor
active employees and their dependents.
A summary of post-employment benefit provisions, changes in benefit provisions, employee eligibility
requirements including eligibility for vesting, and the authority under which benefit provisions are
established are included as an integral part ofthe financial statements of the Department ofHealthcare
and Family Services. A copy of the financial statements of the Department of Healthcare and Family
Services may be obtained by writing to the Department of Healthcare and Family Services, 201 South
Grand Ave., Springfield, Illinois, 62763-3838.
(10) Commitments and Contingencies
(a) Operating leases
The Department leases parking lots, warehouses, and buildings, under the terms of noncancelable
operating lease agreements that require the Department to make minimum lease payments plus
pay a pro rata share of certain operating costs. Rent expense under operating leases was $100.671
million for the year ended June 30, 2011.
The following is a schedule of future minimum lease payments under the operating lease
(amounts expressed in thousands):
Year ending June 302 Amount
2012 $ 89,026
2013 69,388
2014 56,310
2015 36,359
2016 22,100
2017-2021 21 2271
$ 294,454
38
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
(b) Federal Service Charges
The Department's internal service funds receive revenue from charges for services provided to
various federal grants of the State which are subject to review and audit by federal grantor
agencies. The Department believes that it is probable that a payback representing the federal
share of excess fund balances will be required from the Statistical Services Revolving Fund
(SSRF) and the Communications Revolving Fund (CRF) for activities in fiscal years 2010 and
2011. The Department estimates the SSRF refund may result in a payment of up to $7.420
million and the CRF refund may result in payment of up to $3.405 million. The Department has
recorded a liability in the respective funds.
(c) Litigation
The Department is routinely involved in a number of legal proceedings and claims that cover a
wide range of matters. In the opinion of management, the outcome of these matters is not
expected to have any material adverse effect on the financial position or results of operations of
the Department.
(11) State Employees' Deferred Compensation Plan General Description
Under State Employees' Deferred Compensation Plan (Plan) provisions, all State employees are
eligible to voluntarily elect to contribute a portion of their compensation to the Plan through payroll
deduction. The Plan was created in accordance with the Illinois Compiled Statutes ( 40 ILCS 5/24-
101) and Section 457 of the Internal Revenue Code. The financial position and results of operations of
the Plan for fiscal year 2011 are included in the State's Comprehensive Annual Financial Report for
the year ended June 30, 2011. The Plan issues separate financial statements on a calendar year basis
that may be obtained by writing to the Deferred Compensation Plan, 201 E. Madison, Suite 1C, P.O.
Box I9208, Springfield, Illinois 62794-9208.
The following description of the Plan is only general information. Participants and other interested
parties should refer to the Plan agreement for a complete description of all Plan provisions.
Federal law requires the assets of the Plan and the income earned thereon to be held in trust for the
exclusive benefit of the Plan participants and their beneficiaries. Participants' rights under the Plan are
limited to an amount equal to the fair value of the deferral account for each individual participant.
In compliance with Section 457 of the Internal Revenue Code, the Plan limits the amount of an
individual's annual contribution to 100 percent of their annual taxable compensation, not to exceed
$16,500 ($22,000 for participants age 50 or older) for both calendar years 20 II and 2010. The State
does not make any contributions to the Plan. The Plan allows participants a limited make-up on
deferrals in the three years prior to the year a participant reaches normal retirement age. For each of
these three years, a participant can defer the regular limit plus an additional amount based on actual
underutilized deferrals, which were made in prior years, up to a maximum of $33,000 for calendar
years 2011 and 2010.
39
STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
Notes to Financial Statements
June 30, 2011
Participants may withdraw the current value of funds contributed upon termination of employment
with the State of Illinois. Withdrawals can also be made due to financial hardship if approved by a
committee established by the Plan. Upon retirement, participants may select various payment options,
including lump sum or periodic payments. The participants may also elect to delay the distribution of
their accounts to a specific future date. Death beneficiaries may select similar payment options as
retired employees. All investments are assets of the Plan until such time as payments are made to
participants.
(12) Change in Presentation
It was determined that it is more appropriate for any liability that is reported in the General Revenue
Fund and/or the Road Fund related to the workers' compensation program to no longer be accounted
for in the Department's financial statements. The liability will be reported in the State's
Comprehensive Annual Financial Report (CAFR). In order to implement this change in presentation
for the Department's financial statements, the following changes to fund balance were made.
Governmental
Funds
General Road
Fund Balance, June 30,2010,
as previously reported $ (400,957) $ (100,813)
Decrease in prior period
Reported liabilities 403,253 100,813
Fund Balance, June 30, 2010,
after change in presentation $ 2,296 $
Note: This change in presentation is applicable only to the Department's financial statements and is
not applicable to the CAFR presentation.
40
State of Illinois
Department of Central Management Services
Combining Balance Sheet-
Nonmajor Governmental Funds
June 30, 2011 (Expressed in Thousands)
Efficiency
S(!ecial Revenue
Minority and State Surplus
Ca(!ital Projects
Initiatives Female Business Property Capital
Revolving Enterprise Revolving Development
0315 0352 0903 0141 Total
ASSETS
Unexpended appropriations $ - $ - $ $ 46 $ 46
Cash equity with State Treasurer 6 1,999 2,005
Receivables, net:
Intergovernmental 22 22
Other 4 4
Due from other Department funds 197 197
Due from other State funds 2,564 2,564
Due from State of Illinois component units 34 34
Inventories 343 343
~ Total assets $ - $ 6 $ 5,163 $ 46 $ 5,215
......
LIABILITIES
Accounts payable and accrued liabilities $ - $ - $ 129 $ 46 $ 175
Intergovernmental payables 4 4
Due to other State fiduciary funds 17 17
Due to other Department funds 1,064 1,064
Due to other State funds 17 17
Due to State of Illinois component units 1 1
Total liabilities 1,232 46 1,278
FUND BALANCES
Nonspendable - Inventory 343 343
Restricted - General Government 6 6
Committed - General Government 3,588 3,588
Total fund balances 6 3,931 3,937
Total liabilities and fund balances $ - $ 6 $ 5,163 $ 46 $ 5,215
State of Illinois
Department of Central Management Services
Combining Statement of Revenues,
Expenditures and Changes in Fund Balance -
Nonmajor Governmental Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
S!;!ecial Revenue Ca!;!ital Projects
Efficiency Minority and State Surplus
Initiatives Female Business Property Capital
Revolving Enterprise Revolving Development
0315 0352 0903 0141 Total
REVENUES
Other revenues $ - $ - $ 6,199 $ $ 6,199
Other charges for services 1,206 1,206
Total revenues 7,405 7,405
EXPENDITURES
..!:>. N General government (3) 3,214 12 3,223
Capital outlay 395 395
Total expenditures Pl 3,214 407 3,618
Excess (deficiency) of revenues
over (under) expenditures 3 4,191 (407) 3,787
OTHER SOURCES (USES) OF
FINANCIAL RESOURCES
Appropriations from State resources 6,795 6,795
Reappropriation to future year(s) (6,388) (6,388)
Transfers-out 917 (917)
Net other sources (uses) of
financial resources 917 407 (510)
Net change in fund balances 3 3,274 3,277
Fund balances, July 1, 2010 (3) 6 1,211 1,214
Increase {decrease) for changes in inventories (554) (554)
FUND BALANCES, JUNE 30, 2011 $ - $ 6 $ 3,931 $ $ 3,937
State of Illinois
Dee.artment of Central Manag_ement Services
Combining Statement of Net Assets
Internal Service Funds
June 30, 2011 (Expressed In Thousands)
Statistical Paper and Facilities Workers' Group Life
State Garage Servtc .. Printing Communications Management Prof .. slonal Compensation Insurance
Revolving Revolving Revolving Revolving Revolving Servlc .. Revolving Premium
0303 0304 0308 0312 0314 0317 0332 1457 Total
ASSETS
Cash equity with State Treasurer $ 2,414 $ g,348 $ 71 $ 5,562 $ 11,367 $ 7,352 $ 13,077 $ 1,615 $ 50,806
Cash and cash equivalents 3,849 3,849
Securities landing collateral equity of State Treasurer 2,911 2,960 5,069 10,940
Receivables, net:
lntergoverrvnental 45 3,266 3,311
Other 12 2,226 5 3 6 6,581 8,833
Due from other Department funds 2,125 3,430 11,793 10,576 10,000 37,924
Due from other State funds 9,149 65,329 47,502 77,137 3,783 568,447 11 771,358
Due from State or Ulinois component units 4 40 565 14 998 1,621
bwentories 1,799 1799
Total current assets 15548 78147 71 70,914 105859 14098 596599 9205 890441
~
Capital assets not being depreciated 1,768 38,369 40,137
VJ Capital assets being depreciated, net 480 5273 11562 193946 211,261
Total noncurrent assets 480 5,273 13,330 232 315 251 398
Total asseta 16028 83420 71 84244 338174 14098 596,599 9205 1141 839
LIASIU11ES
Accounts payable and accrued liabilfties 6,694 15,354 11,106 45,382 292 80 5,206 84,114
lntargoverrvnentat payables 3 7,566 3,454 1,640 10 4 12,677
Due to other Slate fiduciary funds 12 547 180 301 37 1,077
Due to other Department funds 1,166 14,667 409 266 42 38 3,999 20,587
Due to other Slate funds 33 340 181 351 104 29 1,038
Due to State or IDinois component units 537 446 984
Obligations under securfties lending or State Treasurer 2,911 2,960 5,069 10,940
Deferred revenue 3,675 3,675
Current poltion of long-term obligations 192 3,095 1,237 3154 42 145,814 153534
Total current liabilities 8,101 41,569 17,104 58,126 3,487 151,034 9,205 288,626
Noncurrent portion of long-term obligations 1616 6133 2290 24629 208 445565 480,441
Total liabilities 9717 47702 19394 82755 3695 596599 9205 769067
NET ASSETS
bwesled in capital assets, net of related debt 289 1,704 9,629 207,139 218,761
Restricted for debt servicas 3,849 3,849
Uryestricled 6,022 34014 71 55221 44431 10,403 150,162
Total net asseta $ 6311 $ 35718 $ 71 $ 64850 $ 255 419 $ 10403 $ - $ - $ 372,772
State of Illinois
DepartmentofCenua/ManagementServkes
Combining Statement of Revenues, Expenses and
Changes in Net Assets - Internal Service Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
Statistical Paper and Facilities Workers' Group Life
State Garage Services Printing Communications Management Professional Compensation Insurance
Revolving Revolving Revolving Revolving Revolving Services Revolving Premium
0303 0304 0308 0312 0314 0317 0332 1457 Total
OPERATING REVENUES
Charges for sales and services $ 43,177 $ 141,943 $ - $ 113,285 $ 191,814 $ 12,555 $ 187,057 $ 24,549 $ 714,380
Other 17 4,678 4,695
Total operating revenues 43,194 141,943 117,963 191,814 12,555 187,057 24,549 719,075
OPERATING EXPENSES
Cost of sales and services 30,730 118,987 77,274 181,945 6,831 24,288 440,055
Claims and judgments 187,237 187,237
General and administrative 5,707 2,197 9,597 6,042 (498) 328 23,373
Depreciation 175 5,775 6,387 12,497 24,834
Other 313 11,906 12,219
Total operating expenses 36,925 126,959 105 164 200,484 6 333 187,237 24616 687,718
Operating Income (loss) 6,269 14,984 12,799 (8,670) 6,222 (180) (67) 31,357
.j::o.
.j::o.
NONOPERATING REVENUES (EXPENSES)
Interest and investment income 36 39 180 67 322
Interest expense (139) (746) (51) (2,139) (3,075)
other expenses (18) (162) (5) (185)
Income (loss) before contributions 6,112 14,076 12,743 (10,773) 6,261 28,419
Contributions of capital assets 167 6 3,624 3,797
Change in net assets 6,112 14,243 12,749 (7, 149) 6,261 32,216
Net assets, July 1, 201 0 199 21,475 71 52,101 262,568 4,142 340,556
NET ASSETS, JUNE 30, 2011 $ 6,311 $ 35,718 $ 71 $ 64,850 $ 255,419 $ 10,403 $ - $ - $ 372,772
State of Illinois
Def!.arlment of Central Manafl_ement Services
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2011 (Expressed In Thousands)
Statistical Paper and Facilities Workers' Group Life
State Garage Services Printing Communications Management Professional Compensation Insurance
Revolving Revolving Revolving Revolving Revolving Services Revolving Premium
0303 0304 0308 0312 0314 0317 0332 1457 Total
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales and services $ 717 $ - $ - $ 18,652 $ 819 $ - $ - $ - $ 20,188
Cash received from transactions with other funds 40,733 135,931 95,113 215,488 9,821 136,792 38,196 672,074
Cash payments to suppliers for goods and services (30,172) (67,715) (90,239) (181,726) (6,701) (5,966) (36,649) (419,168)
Cash payments to employees for services (9,903) (64,553) (17,362) (27,817) (402) (120,037)
Cash payments for workers compensation (126,944) (126,944)
Cash receipts from other operating activities 17 17
Net cash provided (used) by operating activities 1,392 3,663 6,164 6,764 2,718 3,882 1,547 26,130
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Other noncapital financing activities (139) (609) (978) (1,726)
Net cash provided (used) by noncapital financing activities !139) (609) (978) !1.726)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Acquisition and construction of capftal assets (371) (862) (5,955) (125) (7,313)
Principal paid on capital debt (206) (2,563) (1,096) (2,888) (6,753)
Interest paid on capital debt (163) !51) !1,588) (1,802)
~ Net cash (used) by capital and related financing activities !577) !3,588) !7.102) !4.601) p5,868)
Ul
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends on investments 37 38 180 68 323
Net cash provided by investing activities 37 38 180 68 323
Net increase (decrease) in cash and cash equivalents 676 (534) (938) 1,222 2,756 4,062 1,615 8,859
Cash and cash equivalents, July 1, 2010 1,738 9,882 71 6,500 13,994 4,596 9,015 45,796
CASH AND CASH EQUIVALENTS, JUNE 30, 2011 $ 2,414 $ 9,348 $ 71 $ 5,562 $ 15,216 $ 7,352 $ 13,077 $ 1,615 $ 54,655
Reconciliation of cash and cash equivalents to
the statement of net assets:
Total cash and cash equivalents per the statement of net assets $ - $ $ $ - $ 3,649 $ - $ - $ - $ 3,849
Add: cash equity with State Treasurer 2,414 9,348 71 5,562 11,367 7,352 13.077 1,615 50,806
CASH AND CASH EQUIVALENTS, JUNE 30, 2011 $ 2,414 $ 9,348 $ 71 $ 5,562 $ 15,216 $ 7,352 $ 13,077 $ 1,615 $ 54,655
State of 11/inois
Dee_artment of Central Manafl.ement Services
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
Statistical Paper and Facilities Workers' Group Life
State Garage Services Printing Communications Management Professional Compensation Insurance
Revolving Revolving Revolving Revolving Revolving Services Revolving Premium
0303 0304 0308 0312 0314 0317 0332 1457 Total
Reconciliation of operating Income (loss) to net
cash provided (used) by operating activities:
OPERATING INCOME (LOSS) $ 6,269 $ 14,984 $ - $ 12,799 $ !8.670) $ 6,222 $ !180) $ !67) $ 31,357
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:
Depreciation 175 5,775 6,387 12,497 24,834
Provision for uncollectible accounts 21 21
Changes in assets and liabilaies:
(Increase) decrease in accounts receivable (4) (267) 5 3,481 3,215
(Increase) decrease in intergovernmental receivables (4) (2.112) (2.116)
(Increase) decrease in due from other funds (1,720) (6.434) (2,307) 22.242 (2,734) (50,265) 3,691 (37,527)
(Increase) decrease in due from component units 2 117 130 (3) (241) 5
(Increase) decrease In inventories (120) (120)
Increase (decrease) in accounts payable and accrued liabilities (883) 625 (9,072) (19,236) (229) 5 56 (28,734)
Increase (decrease) in intergovernmental payables (26) 303 340 (134) (11) 1 473
Increase (decrease) in due to other funds (2,254) (11.293) (305) (2,052) (32) (3) (5,373) (21,312)
Increase (decrease) in due to component units 1 524 (24) 501
Increase (decrease) in deferred revenues (1) (3) 2,249 2,245
"""'
Increase (decrease) in other liabilities !43) !411) 26 !110) !498) 54,324 53,288
0"1 Total adjustments !4,877) p1,321l !6.635) 15,434 !J,504l 4,062 1,614 !5.2271
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 1,392 $ 3,663 $ $ 6,164 $ 6,764 $ 2.718 $ 3,882 $ 1,547 $ 26,130
NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
Gain (loss) on sale of property and equipment $ $ (162) $ - $ (5) $ - $ - $ - $ - $ (167)
Transfer of capital assets, net of related debt, to/from other State funds $ (18) $ 167 $ - $ 6 $ 3,624 $ - $ - $ $ 3,779
State of Illinois
Deparlment of Central Management Services
Combining Statement of Fiduciary Net Assets
Agency Funds
June 30, 2011 (Expressed in Thousands)
Flexible Group
Spending Insurance
Account Premium
0202 0457 Total
ASSETS
Cash equity with State Treasurer $ 1,516 $ 9,071 $ 10,587
Cash and cash equivalents 4,070 4,070
Securities lending collateral equity of State Treasurer 4,937 4,937
Total assets $ 5,586 $ 14,008 $ 19,594
LIABILITIES
Accounts payable and accrued liabilities $ 5,571 $ 9,071 $ 14,642
Intergovernmental payables 15 15
Obligations under securities lending of State Treasurer 4,937 4,937
Total liabilities $ 5,586 $ 14,008 $ 19,594
47
State of Illinois
Department of Central Management Services
Combining Statement of Changes in Assets and Liabilities
Agency Funds
For the Year Ended June 30, 2011 (Expressed in Thousands)
Balance at Balance at
July 1, 2010 Additions Deletions June 30, 2011
Flexible Spending Account Fund (0202):
ASSETS
Cash equity with State Treasurer $ 1,489 $ 30,500 $ 30,473 $ 1,516
Cash and cash equivalents 4,373 29,571 29,874 4,070
Total assets $ 5,862 $ 60,071 $ 60,347 $ 5,586
LIABILITIES
Accounts payable and accrued liabilities $ 5,862 $ 30,072 $ 30,363 $ 5,571
Intergovernmental payables 428 413 15
Total liabilities $ 5,862 $ 30,500 $ 30,776 $ 5,586
Group Insurance Premium Fund (0457):
ASSETS
Cash equity with State Treasurer $ 8,050 $ 49,256 $ 48,235 $ 9,071
Other receivables, net 940 940
Securities lending collateral equity
of State Treasurer 3,295 45,344 43,702 4,937
Total assets $ 12,285 $ 94,600 $ 92,877 $ 14,008
LIABILITIES
Accounts payable and accrued liabilities $ 8,990 $ 49,256 $ 49,175 $ 9,071
Obligations under securities
lending of State Treasurer 3,295 45,344 43,702 4,937
Total liabilities $ 12,285 $ 94,600 $ 92,877 $ 14,008
Total
ASSETS
Cash equity with State Treasurer $ 9,539 $ 79,756 $ 78,708 $ 10,587
Cash and cash equivalents 4,373 29,571 29,874 4,070
Other receivables, net 940 940
Securities lending collateral equity
of State Treasurer 3,295 45,344 43,702 4,937
Total assets $ 18,147 $ 154,671 $ 153,224 $ 19,594
LIABILITIES
Accounts payable and accrued liabilities $ 14,852 $ 79,328 $ 79,538 $ 14,642
Intergovernmental payables 428 413 15
Obligations under securities
lending of State Treasurer 3,295 45,344 43,702 4,937
Total liabilities $ 18,147 $ 125,100 $ 123,653 $ 19,594
48
~Sikich.
Certified Public Accountants & Business Advisors
Members of American Institute of
Certified Public Accountants
3201 West White Oaks Drive, Suite 102 • Springfield, IL 62704
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT
AUDITING STANDARDS
Honorable William G. Holland
Auditor General
State of Illinois
As Special Assistant Auditors for the Auditor General, we have audited the financial statements
of the governmental activities, each major fund, and the aggregate remaining fund information of
the State of Illinois, Department of Central Management Services as of and for the year ended
June 30, 2011, which collectively comprise the State of Illinois, Department of Central
Management Services' basic financial statements and have issued our report thereon dated April
3, 2012. We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of the State of Illinois, Department of Central Management Services is responsible
for establishing and maintaining effective internal control over financial reporting. In planning
and performing our audit, we considered the State of Illinois, Department of Central
Management Services' internal control over financial reporting as a basis for designing our
auditing procedures for the purpose of expressing our opinions on the financial statements and
not for the purpose of expressing an opinion on the effectiveness of the State of Illinois,
Department of Central Management Services' internal control over financial reporting.
Accordingly, we do not express an opinion on the effectiveness of the State of Illinois,
Department of Central Management Services' internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose
described in the preceding paragraph and was not designed to identify all deficiencies in the
internal control over financial reporting that might be significant deficiencies or material
weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies,
or material weaknesses have been identified. However, as described in the accompanying
schedule of findings we identified a certain deficiency in internal control over financial reporting
that we consider to be a material weakness and a deficiency that we consider to be a significant
deficiency.
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A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be prevented,
or detected and corrected on a timely basis. We consider the deficiency described in finding Il­l
in the accompanying schedule of findings to be a material weakness.
A significant deficiency is a deficiency or a combination of deficiencies in internal control over
financial reporting that is less severe than a material weakness, yet important enough to merit
attention by those charged with governance. We consider the deficiency described in 11-2 in the
accompanying schedule of findings to be a significant deficiency.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the State of Illinois, Department of
Central Management Services' financial statements are free of material misstatement, we
performed tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such
an opinion. The results of our tests disclosed instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards and which are described in the
accompanying schedule of findings as item 11-1.
The State of Illinois, Department of Central Management Services' responses to the findings
identified in our audit are described in the accompanying schedule of findings. We did not audit
the State of Illinois, Department of Central Management Services' responses and, accordingly,
we express no opinion on the responses.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, and Department management and is
not intended to be and should not be used by anyone other than these specified parties.
Springfield, Illinois
April 3, 2012
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STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
CURRENT FINDINGS -
GOVERNMENT AUDITING STANDARDS
FOR THE YEAR ENDED JUNE 30,2011
11-1 FINDING: (Weaknesses in internal control over financial reporting)
The Department's year-end financial reporting in accordance with generally accepted
accounting principles (GAAP) to the Illinois Office of the State Comptroller contained
significant errors in the determination of certain year-end account balances and note
disclosures.
The Illinois Office of the State Comptroller (IOC) requires State agencies to prepare
year-end financial reports (GAAP Reporting Packages) for each of their funds to assist in
the annual preparation of the statewide financial statements and the Department's
financial statements. GAAP Reporting Package instructions are specified in the
Statewide Accounting Management System (SAMS) Manual, Chapter 27. Management
is responsible for adopting sound accounting policies and for establishing and
maintaining internal controls that will, among other things, initiate, authorize, record,
process, and report financial data reliably and consistent with management's assertions
embodied in the financial statements.
During our audit of the June 30, 2011 financial statements, we noted material weaknesses
and significant deficiencies resulting from the Department's failure to establish adequate
internal control over the accumulation of information necessary for the proper reporting
of financial information as follows:
• The Department is responsible for recording a liability for workers'
compensation claims for injuries incurred before year-end that are probable of
resulting in an award. This liability is to include estimated losses for pending or
claims considered to be in the process of being awarded at the end of the fiscal
year as well as estimated losses for claims that are unreported at year-end. The
Department currently uses a methodology that includes an estimate of pension­type
awards likely to be paid for injuries already incurred. The Department
estimated this portion of the total workers' compensation liability by calculating
an average annual number of new awards being paid over the last five fiscal
years. Utilizing this methodology, the Department has estimated only 36
pension-type awards with a cost of $24 million that will be made in the future for
injuries incurred prior to June 30,2011. This methodology does not include any
consideration of historical information relating to the date of the injury to the
period when pension-type payments would begin. Based on information
maintained by the Department relating to current pension-type awards being
paid, it takes in excess of three years from the date of the injury before payments
begin on pension-type awards for 87% of the claims. As such, we believe
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claims with approximate awards of $93 million represent a more reasonable
estimate of the future pension-type awards to be made for injuries incurred prior
to June 30, 2011. This results in an understatement of the liability in the
Department's financial statements of approximately $69 million. The estimate
would be more accurate if actuarially calculated based on projected outcomes
based on facts and circumstances inherent in the individual claims and by
applying a consistent and supported assessment of those individual claims.
Department officials have stated the determination of a liability on an individual
case basis is not feasible given competing priorities and staffing issues. They
further stated the suggested methodology seems labor intensive and assumes that
the authority, skill sets and staffing will be consistently available for someone to
continually assess all the items on the pending claims listing. The Department
has adjusted the financial statements to record the additional liability.
• We noted several other errors in the preparation of the Department's financial
statements. The errors included improperly calculating the amount reported as
"invested in capital assets, net of related debt," overstating accounts payable,
failure to eliminate all inter-department charges for internal service fund activity,
errors in the allocation of functional expenses, and errors in the calculation of the
current year lease payments and the future minimum lease payments in the
operating leases footnote. The errors noted were not individually significant to
the financial statements taken as a whole; however, the Department did not have
effective controls over the reconciliation and review functions to ensure amounts
were properly reported at June 30,2011. Department officials have stated that
the Department completes GAAP packages in accordance with deadlines
established by the IOC. Data is compiled from various agency accounting sub
systems into GAAP format. Estimates must be used and thresholds applied to
complete required reporting in the timeframe imposed. Final fiscal year
reconciliations of agency records are then completed as part of the normal
financial reporting process. Any resulting differences are identified and if
material, communicated to the IOC for adjustment in GAAP. The identified
items were not material to either the Department statements or the Statewide
statements; however, the Department did record adjustments for the elimination
of inter-department charges and the allocation of functional expenses.
• The Department did not perform a physical count of the commodities inventory
on hand at any of the twelve commodity storage locations and was unable to
provide a value of the inventory on hand at June 30, 2011. The Department also
has not developed or maintained oversight policies and procedures regarding the
commodities inventory. Procedures over commodities inventory should include
maintaining perpetual inventory records and periodically reconciling records to
physical counts. Generally accepted accounting principles also require the
proper valuation of inventory for financial reporting purposes. While the
commodities inventory balance was not deemed material to the 2011 financial
statements, the lack of a physical count or procedures over the commodities
inventory does not provide for the determination of a value of the commodities
inventory balance at the end of the fiscal year. Future year financial statements
could be misstated as a result.
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As a result of these deficiencies, the Department's financial information was inaccurate.
(Finding Code No. 11-1, 10-1, 09-1, 08-4, 07-4)
RECOMMENDATION:
We recommend the Department implement procedures to ensure GAAP Reporting
Packages prepared and submitted to the Office of the State Comptroller for financial
reporting purposes are complete and accurate.
DEPARTMENT RESPONSE:
The Department agrees with the recommendations.
Except for the finding related to the Workers' Compensation calculation, the items
detailed above were not material to the Department statements or the statewide
statements.
An adjustment was posted to the financial statements for the additional Workers'
Compensation liability. The Department plans to contract with an actuary for assistance
with future Workers' Compensation liability calculations. In addition, CMS financial
staff will examine actual liability figures and compare them with the CMS estimates ($24
million) and OAG estimates ($93 million). Based on these comparisons and improved
data collection, we will consider any additional historical and current period injury
related variables that affect the accuracy of the estimating methodology and make the
necessary improvements to enhance accuracy.
The Department continues to cross train and encourage communication and awareness
among fiscal and Shared Service Center accounting staff regarding fiscal transactions and
the related financial statement treatment. Increased review of financial reports and in
particular lapse period transactions continues to be a major focus of the Department. The
Department is also working with the Shared Services center on documenting the internal
GAAP process.
In terms of commodities inventory, it is Department practice to only purchase
commodities sufficient to meet short-term needs. We do not stockpile commodities. We
agree to document a policy outlining our commodities purchasing practices.
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11-2 FINDING: (Inadequate security and control over the midrange environment)
Although the consolidation was authorized in January 2005, the Department had not
implemented adequate security and controls over the midrange environment.
20 ILCS 405/405-410, effective January 15, 2005, mandated the Department to
consolidate Information Technology functions of State government. Due to the
consolidation, eleven agencies' IT functions were consolidated into the Department. As a
result of the consolidation, the Department became responsible for the security and
control of the midrange environment.
Although the Department had implemented standards to secure and control the midrange
environment, the standards did not require widespread deployment to legacy systems. As
such, the Department still had not implemented effective security controls over all servers
in the midrange environment.
Upon review, we noted standards had not been consistently applied on all servers.
Specifically, we noted servers:
• Running unsupported operating systems or service pack versions,
• Without anti-virus software,
• Not properly backed up,
• With deficient password length and content requirements,
• With administrative and user accounts which did not require passwords.
Additionally, we noted the Department had not conducted a comprehensive review of
individuals with administrative rights to the environment, to ensure appropriateness.
Although the Department shares responsibility with consolidated agencies, the
Department has the ultimate responsibility to effectively secure and control its midrange
environment which supports agency applications and data. As outlined in 20 ILCS
405/405-10 (4)- It shall be the duty of the Director and the policy of the State of Illinois
to manage or delegate the management of the procurement, retention, installation,
maintenance, and operation of all electronic data processing equipment used by State
agencies in a manner that provides for adequate security protection. Since the
Department has primary control over the midrange environment, it was incumbent upon
them to ensure adequate controls existed to protect agency applications and data. In
addition, generally accepted information technology guidance endorses the development
of well-designed and well-managed controls to protect computer systems and data.
Effective computer security controls provide for safeguarding, securing, and controlling
access to hardware, software, and the information stored in the computer system.
Department officials stated while many new comprehensive policies, standards,
procedures, processes and associated tools have been developed and implemented to
properly address the issues, there are a large number of older systems running on data
center servers that cannot be updated until agencies upgrade their applications.
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Many of the processes that are required to properly secure the midrange environment are
very complex and must be fully tested to ensure that existing agency applications are not
impacted by installing operating system updates, anti-virus protection, and/or patches.
These legacy agency applications were designed and developed to run on hardware and
systems that have since become obsolete - converting the applications to the latest
systems is an expensive and lengthy process. Progress in these areas and the other
elements in the finding have been hampered over the past few years by staff shortages
and financial constraints, neither of which we anticipate will be improving in the near
future.
Without the implementation of adequate controls and procedures, there is a greater risk
unauthorized access to the Department or agency resources may be gained and data
destroyed or misused. Prudent business practices dictate the Department strengthen its
security to protect its assets and resources against unauthorized access and misuse.
(Finding Code No. 11-2, 10-2, 09-4, 08-7, 07-11)
RECOMMENDATION:
The Department should ensure the standards to secure and control the environment are
implemented across the midrange environment.
Specifically the Department should:
• Standardize password length and content requirements and ensure all accounts
require a password.
• Update servers to current vendor recommended patch or service pack levels.
• Ensure all servers are running antivirus software.
• Ensure all servers are routinely backed up.
• Conduct a comprehensive review of individuals with administrative rights to
ensure appropriateness.
DEPARTMENT RESPONSE:
The Department concurs and will continue to strive toward standardization and maturity
in the midrange environment.
The Department has implemented numerous policies, standards, processes, procedures
and tools to help address these issues. Due to the size and nature of the disparate
environment, many of the legacy agency environments do not fully meet the standards,
but we are working to improve these environments and working with the agencies to
update applications where needed. Implementing these changes is very time and resource
consuming in such a large and diverse environment.
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STATE OF ILLINOIS
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES
PRIOR FINDINGS NOT REPEATED
A FINDING: (Incomplete and inaccurate records over computer systems and
equipment)
In the prior year, the Department did not maintain complete, accurate, or detailed records
to substantiate its current midrange computer system and equipment.
During the current period, the Department embarked on a project to implement a new
database to track the midrange equipment and installed a software tool which
documented the operating systems, patch levels, and antivirus software. Significant
improvements from the prior year were noted regarding the accuracy of information and
any discrepancies noted were immaterial. (Finding Code No. 10-3, 09-5, 08-8, 07-12)
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